Prepaid cards offer popular alternative to banks

In general, fees have dropped in recent years, as Walmart and other major players cut charges. But buyers should check fees on each card to see what best fits their spending profile, experts suggest.

Some consumer advocates say the government can do more to monitor the burgeoning industry.

The Florida Attorney General's Office in late May announced a civil investigation into five prepaid debit companies for possible deceptive and unfair practices. None of the five are based in Florida.

The probe came after consumer complaints about hidden fees. Investigators also want to check if some companies misrepresented their ability to improve credit scores for card users, officials said.

Under scrutiny are Green Dot, First Data Corp., Account Now, Netspend Corp., and Unirush Financial Services, which was founded by hip-hop mogul Russell Simmons. Green Dot has said it discloses fees and welcomes the inquiry.

The Center for Financial Services Innovation, a Chicago-based nonprofit, wants the government to require prepaid card issuers to list all fees consumers pay in a "standardized box" that would allow customers to better compare fees from one card to another.

Card issuers charge a variety of fees for activation, ATM use, customer service, cancellation and inactivity, among other things. The amount of fees can vary according to what the card is being used for.

This example calculates the fees charged by five issuers of prepaid cards for a teenager's monthly allowance of $100. It assumes the teen goes to an ATM twice a month to make a withdrawal. The research firm CardHub.com, which did the analysis, said Green Dot in this case charges only $5.95 for loading less than $1,000 a month. American Express charges $2 per ATM withdrawal after the first free withdrawal, plus an ATM owner fee that averages $2.33, CardHub said.